Category Archives: economy

Above is a link to a video about on a case that I am working on that appeared on NECN on its 5pm new’s broadcast last night, June 4, 2010. The focus of the news media has been how consumers are boycotting BP gas stations because of the oil spill in the Gulf of Mexico and BP’s handling of the cleanup. The issues that I am working on show the difficulty of the small business owners, and the effects that the public sentiment against BP is having on independent gas station owners.

There is also a link to an article published on June 4, 2010 in the Patriot Ledger and the Brockton Enterprise.

I was meeting with a commercial tenant representative today over coffee, and during our discussion about what trends he was noticing in business, he said that he had been accumulating leads more rapidly over the past few months. His view was that people were starting to consume more, or at least entertain thoughts of consumption and expansion efforts in business. They’re not feeling more confident because the economy is on an upward trajectory, they’re just tired of being depressed. I think he’s absolutely correct. When you get hammered by a lot of bad news, eventually you don’t care anymore. It gets to a point that you become sensitized toward bad news, and you just start moving forward with plans, and loosening the purse strings for no other reason than you become tired of the ways things are.

This is the new normal.

Thinking about this, I realized that, although my set of circumstances differ, and my perspective is shaped by the view from my seat, my conclusion is the same.

Things changed in the Fall of ’07, and have not been the same since. 2009 was an improvement, challenging but good. Business in 2010 is different to the way it was in 2009 — things are changing rapidly. There’s more activity, but not greater volume; clients are focused on cost cutting, do not have the ability to risk their remaining resources, are being smarter about their spending, and are less likely to ride with a project for as long as they had done in earlier years. These factors are pressuring the market for services to change from the a la carte delivery of specific services to a more all-encompassing pre fixe. Clients are demanding the delivery of those services in a way that adds value to their projects. This is leading to more price stability for buyers of services, more specialization and niche building by sellers of services, and a movement away from the traditional ways in which services were priced and delivered.

Once again, a new normal.

Naturally, the question of whether we “are at the bottom” and “when is the economy going to return to normal” will be asked. Well it isn’t going to — there’s a new normal.

Our economy has lost millions of jobs during this recession, and even if we could replace them, it would take many years to do so. Current business conditions, however, discourage small businesses from adding new workers. Specifically, health care costs, taxes, data privacy concerns, payroll costs and employee benefits are a major discouragement to hiring new employees. At the same time, new technology has made it easier to outsource job functions than to hire more employees. A company that needed 8 employees 10 years ago, can now achieve the same output with only 3 employees. It’s possible now to bank online and make deposits from the office; bookkeeping and accounting are easily outsourced as online software programs download banking, billing, revenue and expense data and process the data into registers and reports; billing and accounting information can be accessed from the internet by an outsourced independent contractor; printing, copying, marketing, advertising, internet strategy, as well as informational technology are all outsourced, and administrative and secretarial services are shared between companies that have co-located in larger office space, with any excess services needed being handled by virtual assistants.

My point being that the old jobs lost are not going to come back, big companies will shrink, and small companies will try to remain small. Jobs are being created, and will continue to be created but they are being created by new businesses, not existing businesses. The new jobs are in different fields, and workers will need new skills.

Once again, this will be the new normal. The new normal is to adapt or die. Adaptation will need to be done quickly, and will require one to be nimble. Large entities are by their nature not nimble and cannot adapt quickly enough to create significant opportunities in the new normal. It’s up to us little guys to do that. I’m up to the challenge, are you?

You would have to be a complete loser to not be able to hold on to the democratic senate seat held for the past half century by the late Ted Kennedy in liberal Massachusetts. Turns out, all you had to be was Martha Coakley. Nothing against Scott Brown, who proved to be an astute politician, tapping into a disgruntled blue-state electorate with the right message at the right time, but the odds were against being the first Republican to be elected as a Senator from Massachusetts since 1972. The election of Brown was fueled by an electorate that is disillusioned by the direction that the country is taking at the helm of our Democratic leaders in Washington. While the prior Republican Administration has been rightly blamed for the policies, deregulation, actions, and positions that created our current economic turmoil, the current Democratic Administration now owns the problem, as usually happens when you take over in the middle of a mess. The current leaders in Washington have been in charge for a year now, and they have not engendered confidence and support for their agenda of “change”. Against that backdrop, Democratic Senate candidate Martha Coakley faced a restless electorate, and snatched defeat from the jaws of victory. Hers was one of the most listless, uninspiring, and misguided campaigns that I have had the displeasure of watching. Martha Coakley, the Attorney General, clearly showed that she has very limited political skills. Hers was a botched campaign of massive proportions, a complete and utter failure to read the political landscape, the will of the people, and to energize an overwhelmingly democratic electorate that were still prepared to hold their noses and vote for her if she could have even showed one ounce of personality, one iota of a spark, one tiny inkling of political leadership. She, however, showed nothing. Even a glimmer of personality would have shown she could interact on an inter-personal level with the other Senators in Washington, and represent us adequately in Congress. She couldn’t figure out that the youthful, dynamic, vibrant and personable Scott Brown could beat her during this time of disillusionment with government, so she spent the Holidays with her family. No need to run a campaign.

My point being that politics and personality are inextricably mixed, and that even in one of the most liberal states in the nation, a democratic candidate with the personality of a Martha Coakley could lose a Senate seat held by her party for almost fifty years.

From a business perspective, this, once again, is proof positive that we are in unchartered waters. People are not confident in the path we are travelling, so they are holding back, whether it be from consumer purchases, investments, or on the institutional side, banks are holding onto, rather than lending money. Taken together, these factors are more evidence of the point that I have made in many previous posts that we are nowhere nearly out of the recession woods yet, and that for the majority of the populace these remain treacherously difficult times. From difficulty, we must, however, make opportunity, and to me it looks like 2010 will continue to present us with investment opportunities in the distressed asset marketplace.

With year-end traditionally being a time to slow down and reflect, this post is intended to be a review of the past year, and a prognosis of sorts for what the transactional deal marketplace may show us in 2010.

However, slowing down and reflecting on this year only gives me that post-roller coaster sickness feeling. This was one of the most challenging years in business for most of us. Although it ended up being a positive year from a business standpoint, it required a wholesale reinvention of what we do, as most of our business models were affected by many polar opposite, sometimes unintended and varied influences that converged in a dizzying array of confusion. It was humorous to read that many prognosticators declared that the end of the recession was near, or even that the recession was behind us, because, contrary to the statistical reports showing declines in unemployment figures and upticks in consumer confidence, in reality the fundamental problems that grounded the economy in 2007 are not significantly different from those prevalent now. Other than runaway bank profits and the gilded age of Wall Street bonuses, our world is now as it has been for the past 2 years. We have made forward progress, but what the economic landscape has in store for us in 2010 will prove to be a mixing pot of small explosions that together will concoct a distressed asset stew full of nutritional values that we may only be able to sample if we have the coupons. Well, friends, we are the manufacturer of those coupons.

Let me try and catch you up on all that has happened in this busy year! Continue reading →

It’s been about a year since the meltdown on Wall Street, and it’s good to hear that Ben Bernanke thinks the recession is over.

I believe that much has been done, and that the steps taken have been positive, but it’s not over by a long shot. Yes, necessary things have been done to stabilize the economy so that we are now just in a recession as opposed to the “Great Recession”, and it appears that what has been done by governmental design is to shore up, capitalize, and stabilize the banking system. Although that has left distaste in the mouths of many, it seems to have been a baby and bathwater bailout.

Nevertheless, let’s not kid ourselves, the fundamentals that led to the “Great Recession” are still with us, and the statistics that are giving us hope are somewhat misleading at the present time. Continue reading →

It may be hard to digest, but if you read the tea leaves, the financial titans and intellectual powerhouses that served in both the Bush Administration and now serve in the Obama Administration may have approached the resolution of our economic issues differently but they seem have reached the same conclusion. We need Wall Street to be strong; New York needs to remain the financial capital of the world. Continue reading →

The current marketplace has made assets available at below-market values for a variety of factors, such as tenant vacancies, owner distress, a financial imbalance in the the property’s value, an unfavorable loan structure, a lack of owner capital reserves, credit restrictions, and a variety of other factors.

Notwithstanding the availability of distressed real estate, it is difficult as an individual, or a small investor to acquire investments on a scale that would allow one to execute, on favorable terms, an investment strategy that will maximize the return on these investments.

Therefore, I am currently advising clients operating in hotbed segments of the commercial and residential real estate markets to complete a private offering that pools investor funds together in an investment entity dedicated to purchase, manage and then sell undervalued or distressed assets when the asset values improve, or to rehabilitate and re-position such assets for year-on-year cash flow. When structured effectively, and managed competently this can be a very lucrative investment strategy.

The pooling of interests is effective because the purchase of distressed assets is time consuming, very risky and capital intensive, and requires industry knowledge to identify, evaluate, secure, close-on, rehabilitate, and then manage, operate, and market these properties. A pooling of interests, whether it be industry expertise and/or financial resources to create the structure, identify, acquire and then manage the assets will be necessary to secure the equity needed to obtain financing on adequate terms. This strategy also creates a well conceptualized business plan, and it shares the risks.